HDFC Bank bad debt ratio could reach decade’s highest level, CEO-designate says

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The gross bad debt ratio of HDFC Bank, the country’s largest private lender, could widen due to slippages in loans under moratorium, said its managing director – appointed Sashidhar Jagdishan.

The bad debt ratio could drop from 1.4% to 2%, which will be close to the highest level since the global financial crisis, Jagdishan said in a conference call with analysts on Friday. Jagdishan will succeed Aditya Puri as Managing Director and CEO on October 27, 2020.

The bank’s gross non-performing assets (GNPA) – the bad debt ratio – stood at 1.36% at the end of June compared to 1.4% in the first quarter of FY20. GNPA was 1.26% at the end of March 2020. Net NPA decreased to 0.33% in June 2020 from 0.43% in June 2019. Net NPA was 0.36% in March 2020.

Provisions (including NPA) and contingencies of 48.9% at Rs 3,891.5 crore in Q1Fy21 against Rs 2,613.7 crore in Q1Fy20. Specific provisions for loan losses were Rs 2,739.8 crore in the first quarter of FY21, compared to Rs 2,248.0 crore in the June quarter of last year. General provisions and other provisions increased several times to reach Rs 1,151.7 crore in the first quarter of FY21, compared to Rs 365.7 crore in the first quarter of FY20.

The bank said it used its analytical models to determine slippages, which resulted in faster recognition of NPAs and sped up specific provisions for them. The Bank also continues to hold provisions against the potential impact of Covid-19 based on the information available at this stage. These provisions exceed the standards prescribed by the Reserve Bank of India.

The country’s second-largest lender aims to increase its market share by 6-7 percentage points to around 15%; sees more business in smaller towns and villages.

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